Help your kids save with an UTMA account.
"A what-ma account?" you may be asking.
An UTMA is not an acronym you're likely to see in text messages. Rather, it's a type of savings account -- an alternative to a traditional savings account -- that keeps parents in the driver's seat of their child's saving.
Financial institutions like Dupaco offer an UTMA account, or Uniform Transfer to Minors Act. The custodial account is used to hold and protect assets for minors until they're old enough to manage the money themselves.
"It's a way mom or dad can save money for a child, and that adult is the custodian of the account," says Aaron Plein, vice president, branch manager/service delivery at Dupaco's First Avenue branch in Cedar Rapids, Iowa. "The child can make deposits and build that savings account. But when it comes to withdrawals, the custodian is the one who says 'yes' or 'no.'"
The account has one custodian, typically the mother or father of the child, and a successor custodian, who would assume that role should something happen to the custodian.
The custodian decides when the child is ready to have access to the funds. At that time, typically when the child reaches age 18 to 22, the custodian transfers the account to a traditional savings account.
"Until you feel like your kids are responsible enough and ready to take on the account on their own, you're the driving force and steer how it's handled," Plein says. "Mom and dad have more peace of mind knowing that their child isn't going to be able to take out $100 here or there."
UTMA accounts can hold everything from birthday cash to babysitting bucks – any money the child wants to save.
To help kids get excited about saving, Dupaco has an incentive program for saving, called the DoPack Saver's Club.
DoPack members are rewarded with a sticker on their Saver Card each time they make a deposit of $5 or more. Kids must have their own Dupaco savings account and be present when the deposit is made. DoPack members can choose a prize after they make their third, sixth and 10th deposits.
"It rewards them for saving," Plein says. "We've seen a boost at this location of kids coming in and bringing their cards. The reward they get for saving makes it fun and encourages them to come back and make more deposits."